Whatshot
Property Talk
Property Talk
Date: 2018-12-21
Good news for property investors
It's that wonderful time of year to down tools, spend time with family and friends and take stock of where you are and where you would like to be in 2019.
For those of us in South Africa that service the very highest end of the residential property market, it has been an extremely tough year. Whereas pricing rarely adjusts downwards in the High Net Worth market, the volume of transactions does fall dramatically and this is exactly what has been evident during the past year.
For those of us that have weathered the storm, we will be stronger and better equipped to handle the year ahead. Although we remarked during the first half of 2018 that the lower end of the market was still very active we have noted recently that things are changing.
FNB's recently published insight into the performance of the four key market segments indicates that although the top end of the market led the market downwards, the lower end is now "catching down".
This report defines High Net Worth Areas as those with an average price of R6.8m; Upper Income Areas with an average of R3.36m, Middle Income Areas with an average price of R1.63m and Lower Income Areas as having an average price of R1.05m.
Ultimately economic stagnation affects all segments of the market. The more recent agent activity rating across these four segments has indicated a stabilization of the High Net Worth and Upper Income areas while the Middle and Lower Income segments have demonstrated a more noticeable decline in activity.
The average time a home remains on the market prior to a sale being realized is an excellent way to measure the relative demand across these segments.
The High Net Worth segment was, as expected, the longest at 23.32 weeks as at the 3rd quarter of 2018. However this measurement has moved largely sideways since the 2nd quarter of 2017.
The Upper Income average time on the market was 17.18 weeks as at the 3rd quarter of 2018, which was a slight decline (improvement) on the 17.5 weeks recorded in the 1st quarter of 2018.
The Middle Income area was 16.43 weeks as at the 3rd quarter of 2018, having shot up from the 10.8 weeks recorded in the 2nd quarter of 2017.
The Lower Income Area estimate was the lowest at 12.21 weeks as at the 3rd quarter of 2018, but remarkably higher than the 8.6 weeks recorded in the 2nd quarter of 2017. The performance gap between the lower end and the higher end is therefore closing quickly as we see evidence of a weakening lower end of the market.
The Lower Income segment is becoming more financially pressured and has less of a buffer to help it through a weak economic period. The measurement of the percentage of sellers selling due to financial pressure within the Lower Income segment has already increased from 15.2% as an average in 2017 to 17.4% for the 2018 year to date.
The Middle Income segment sellers selling due to financial pressure is now 15.8%, up from 14.6% in 2017, the Upper Income segment is now 15.2%, up from 13.8% in 2017.
Interestingly the High Net Worth segment actually saw a decline from 14.7% to 14.2%. For 2019 the buying opportunities can be expected to be in the Lower Income segment and this is good news for property investors.